Reference no: EM132513932

Question 1. Often "high-flyer" stocks have high P/E ratios, yet some analysts seek low P/E stocks. Are high or low P/E ratios more reliable as tools for valuation of stocks?

Question 2. Explain how (a) the payout rate, (b) the expected dividend growth rate, and (c) the required rate of return, affect the P/E ratio.

Question 3. The XYZ Corporation's stock is trading at $75. The firm paid out $2.20 in dividends during the last year. If the payout ratio of the firm is 45 percent, what is its price earnings ratio?

Question 4. ABC paid an annual dividend of $1.25 last year. Investors expect the dividends to grow at a rate of 6 percent per year over the foreseeable future. If the required rate of return for this stock is 12 percent, what is its intrinsic value today?

Question 5. The Pizza Domino's Company paid $2.00 per share in common stock dividends last year. The company's policy is to allow its dividend to grow at 5 percent for 4 years and then the rate of growth changes to 3 percent per year from year five and on. What is the value of the stock if the required rate of return is 8 percent?

Question 6. L-1000-9-5-6

M-100-10-8-10

N-500-18-17-15

i ) (a)Calculate the current value of Bond L.

(b)What will happen to the value/price as the bond approaches maturity?

ii) Calculate the current value of Bond M

iii) Calculate the current value of Bond M if the time of maturity is six years.

iv) (a)Calculate the current value of Bond N. (b) What will happen to value/price as the bond approaches maturity?